Feds sue 3 Utah companies, owner over sales calls

Telemarketing • FTC says it made 16 million calls to people on Do Not Call list.

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A Utah company and the Federal Trade Commission have filed dueling lawsuits against each other, with regulators alleging the Murray company made 16 million calls to people on the National Do Not Call list and deceived customers.

The Utah company, Corporations for Character LC, accused the FTC of "institutional zeal and hostility" toward businesses such as itself that use the telephone to market products and raise funds for charities.

Matt Cooper, the in-house attorney for the company and related entities, said Monday the lawsuits were the culmination of a two-year dispute.

"The bottom line is the FTC wants to make it too expensive and too dangerous for companies that want to get their message out to use the phone," said Cooper.

The FTC filed its lawsuit Thursday in Tallahassee, Fla., alleging Feature Films for Families Inc., Corporations for Character LC and Family Films of Utah, and their owner, Forrest S. Baker III, violated the Federal Trade Commission Act and the Telemarketing Sales Rule. On Friday, Corporations for Character fired back with its lawsuit filed in U.S. District Court for Utah in Salt Lake City.

The FTC lawsuit states that in 2008 and 2009 the Utah companies conducted a nationwide calling campaign under the name "Kids First" on behalf of a nonprofit group called the Coalition for Quality in Children's Media.

They offered consumers two free DVD movies and requested feedback on whether they should be on the Kids First recommended list. However, according to the FTC, Corporations for Character representatives did not disclose that those who accepted the offer would be called back to try to sell them additional movies.

Representatives also failed to disclose that almost all proceeds would be paid to the Utah companies and not the coalition, the FTC alleges.

Many of the calls were to people who had registered their numbers on the National Do Not Call Registry, which was established in 2003 by an act of Congress after vociferous complaints over a tidal wave of telemarketing calls to U.S. homes.

In addition, according to the lawsuit, representatives of the Utah companies made 8 million unsolicited calls to households in areas where a movie produced by Baker, "The Velveteen Rabbit," was being screened in theaters.

Corporations for Character also solicited donations on behalf of fraternal police and firefighter organizations, saying the funds would go to training, death benefits, family assistance for officers killed in the line of duty, volunteer fire departments and disaster victims, the FTC suit said.

The organizations received only 15 percent to 33 percent of the money donated, yet the callers told potential donors that the full amount of a pledge "was actually budgeted" for assistance and, the lawsuit alleges, that some of the charities mentioned in the pitches received no funds.

Cooper said he would not address the specific allegations but noted that the Utah companies "are conscientious in following federal and state laws."

"We don't agree that we violated the Do Not Call law," he said. "We don't agree we've made misrepresentations."

The FTC suit seeks preliminary and permanent injunctions to prevent more violations and requests fines in unspecified amounts. An FTC spokesman, Mitch Katz, said the suit was filed in Florida because some of the customers are from there and because some affiliated entities also are in that state.

The Utah lawsuit seeks a declaration that the companies' activities are constitutionally protected and legal and that future calls will be not be subjected to "arbitrary and capricious law enforcement threats."

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